For Customers

Support

Americas+1 212 318 2000

EMEA+44 20 7330 7500

Asia Pacific+65 6212 1000

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Your HR and Payroll compliance and policy solution! Comply with federal, state, and international laws, find answers to your most challenging questions, get timely updates with email alerts, and more with our suite of products.

The largely unexpected election of Donald Trump as the nation's 45th president, and
the myriad changes his administration and a Republican-controlled Congress are expected
to implement, led the editorial advisory board of
Bloomberg BNA's Health Law Reporter to select health-care policy as the top health law issue for 2017.

The advisory board's ranking includes most of the usual suspects, but Trump's promise
to repeal the Affordable Care Act, now expected to be accomplished through a repeal-and-replace
or delayed replace scenario, will affect the health-care industry—still adjusting
to ACA initiatives—in a wide array of areas, they said.

Many board members said “uncertainty”
is the year's buzzword, but Katherine Benesch, with Benesch &
Associates LLC in Princeton, N.J., perhaps captured the board's mood best in saying
2017 is sure to be a “bumpy roller coaster ride,”
with payers, providers and patients all trying to figure out how whatever happens
with the ACA will affect them.

Fraud and abuse came in as the number two concern for board members in 2017. It's
an area that is a perennial litigation and compliance focal point and one they said
they don't believe a change in administration will affect.
“Fraud enforcement may be the only truly nonpartisan issue in health-care law,” Howard
T. Wall III, executive vice president and chief administrative officer of RegionalCare
Hospital Partners Inc. in Brentwood, Tenn., told Bloomberg BNA.

Medicaid, one of the biggest question marks for 2017, came in third because Health
and Human Services Secretary-designate Tom Price and Seema Verma, Trump's pick to
head the Centers for Medicare & Medicaid Services, have supported major program overhauls.
Most board members said they believe the administration will try to turn Medicaid
into a block grant program, but Jennifer Ecklund, with Thompson & Knight LLP in Dallas,
predicted that will “likely be met with lawsuits by the affected states.”

Consolidation in the health-care industry ranked fourth. It increased dramatically
in 2016 and board members said it is expected to remain hot as the evolution away
from community and regional health-care systems to larger multi-state and national
providers continues.

On the payment front, they said the threat of Medicare privatization, and the future
of alternative payment model implementation, made this issue fifth.

Along with a push for health-care industry consolidations comes the potential for
a great deal of antitrust activity, making this sixth on this year's Top 10 list.
Provider regulation—despite uncertainty concerning how much regulatory rollback will
be accomplished—ranked seventh, followed by telemedicine, health information and corporate
governance.

All in all, board members said predicting the landscape at the end of 2017 would be
impossible but that prognostications concerning the extent and speed of changes coming
to the health-care industry are likely exaggerated.

Health Law Reporter's Top 10 for 2017

1. An unpredictable Trump administration and Republican Congress make
health-care policy the top issue.

2.
Fraud and abuse compliance and enforcement pressures will remain a bipartisan issue.

3. Concerns over the program's future under new CMS leadership make
Medicaid a top issue.

4.
Consolidation in response to payment and provider practice pressures will continue.

1: HEALTH-CARE POLICY: ‘Bumpy Ride'
Forecast in Election's Wake

Health-care policy seems an odd choice for the premier spot in
Health “Law”
Reporter's
2017 outlook, but it was the overwhelming choice of advisory board members trying
to interpret tea leaves amidst a wealth of post-election uncertainties.

Health lawyers have focused on operational topics for the past several years because
they mostly were concerned about how various health-care initiatives would be implemented,
Robert L. Roth, with Hooper, Lundy & Bookman PC, Washington, told Bloomberg BNA. That
will shift in 2017, with health-care policy becoming the most important concern, he
said.

Trump's election “will keep health lawyers and their clients guessing” until his policies
become clearer, Howard Wall told Bloomberg BNA. The “entire health-care arena is likely
to be impacted in some fashion”
by the new administration's policies, Kim H. Roeder, of King &
Spalding LLP, Atlanta, said.

Health lawyers will be challenged to provide clients with “informed but not overconfident
advice about the direction of health-care policy in the Trump administration,”
Richard D. Raskin, with Sidley Austin LLP in Chicago, told Bloomberg BNA. J. Mark
Waxman, with Foley & Lardner, Boston, advised taking it slowly and suggested adopting
a “wait and see” attitude. Nothing will happen quickly, he said.

That means preparing hospitals, health plans, doctors and other providers for the
coming changes will be a challenge for lawyers in the next year, Katherine Benesch
said.

ACA's Long Goodbye

Everyone wants to know if Trump will follow through on a campaign promise to dismantle
the ACA, President Barack Obama's signature health-care reform law. His nomination
of strident Obamacare critic Tom Price to be HHS secretary indicates an intention
to do so.

But Trump softened his rhetoric after the election, suggesting a less-than-total repeal,
a delayed repeal, or a repeal-and-replace might be more appropriate. Republican lawmakers
already have floated replacement plans, some of which go farther than Trump is believed
to be leaning.

“The uncertainty surrounding ‘repeal and replace' will leave many providers dazed
and confused,” Mark A. Kadzielski, of Pepper Hamilton LLP in Los Angeles, said. He
thinks the agencies will be pressed to rollback regulations.

A repeal without any consideration of reasonable alternatives would be a disaster,
the advisory board members said. It would devastate the health-care and health-insurance
industries, according to D. Brian Hufford, of Zuckerman Spaeder LLP, in New York.

One reason is that over 20 million people who gained health insurance under the ACA
stand to lose coverage if there is a flat-out repeal. These individuals either wouldn't
get the care they need or health-care providers would be left paying the bills for
their treatment, advisory board members said. Hospitals also would suffer as demand
for uncompensated care increased, Hufford said.

Kirk Nahra, of Wiley Rein LLP, in Washington, warned about an ACA repeal's “material
human impact.” This is the “first place where the impact of a new administration that
has hard-line political positions without sufficient or appropriate policy back-up”
will be felt, Nahra told Bloomberg BNA.

A “repeal of Obamacare could leave insurance companies with an even greater actuarial
nightmare than the one they currently face,” Howard Wall said. Still, insurers “seem
cautiously optimistic,” due mainly to the prospect for favorable legislative and regulatory
treatment of Medicare Advantage plans and market reforms, such as cross-state sales,
that have been discussed, he said.

GOP wins in the states raised hopes for less state-level regulation, he added.

In any event, neither full repeal nor replacement will happen on “day one,”
Jack A. Rovner, of The Health Law Consultancy in Chicago, said. The Republican party
doesn't have a strategy, timeline or credible replacement proposal, and neither does
the incoming administration, he said.

Repeal and replacement, moreover, will face many of the same policy and political
challenges as Obamacare regardless of the form it takes, Elisabeth Belmont, corporate
counsel for MaineHealth in Portland, Me., said.

Jenga Game

So what will “Trumpcare”
or “Ryancare,” as Gerald M. Griffith, with Jones Day in Chicago, dubbed it, look like?

“The ACA repeal process will be like a game of Jenga,” Lowell C. Brown, with Arent
Fox LLP, Los Angeles, told Bloomberg BNA. “Republicans will try to remove individual
pieces of the law without causing the structure to fall apart completely.” But, they
“have too many ideas, making it difficult to reach consensus on what to choose.”

Some Obamacare provisions are extremely popular, advisory board members said. They
would be surprised to see a replacement plan that doesn't prohibit insurers from denying
coverage based on pre-existing conditions or allow people to keep adult children on
their employer-sponsored plans until age 26. Doing away with those sections could
be dangerous politically, they said.

The cost-sharing mechanisms, like insurer subsidies and tax credits, could be on the
chopping block, however. These provisions could be dumped fairly easily during the
budget reconciliation process, board members said, although that could lead to the
“death spiral” that prompted the adoption of the individual and employer mandates
to begin with, Rovner warned.

Several board members brought up the cross-state insurance sales proposal. Brown,
for example, warned that it would need to address the temptation for insurers to choose
home states, like Delaware, with lax insurance regulations. “Chaos would ensue if
that occurs,” he said.

The cross-state sales initiative presents an opportunity for a few national commercial
health insurers, Rovner said. However, what would a provider licensed and domiciled
in Vermont, for example, have to offer purchasers in Hawaii? Can out-of-state insurers
really offer products that can compete with in-state insurers on price, access and
value? And why would state regulators allow insurers not licensed in their states—and
hence not regulated there—to sell health insurance to state residents? Answers to
those questions are not readily apparent, he said.

Unwinding Nightmare

The sheer magnitude of health law issues affected by the ACA also must be kept in
mind when speculating about a replacement, Anne Murphy, former vice president and
general counsel at Rush University Medical Center, Chicago, Ill., told Bloomberg BNA.
The ACA-required or precipitated changes to payer reimbursement programs, False Claims
Act (FCA) litigation, Stark law compliance, antitrust policy and prescription drug
regulation, to name just a few.

“Unwinding everything that has been rolled out over the past six years would be a
nightmare,”
Thomas Wm. Mayo, the Altshuler University Distinguished Teaching Professor at the
SMU Dedman School of Law in Dallas, told Bloomberg BNA.

Moreover, there is no “logical reason” to reverse positive industry-wide trends, like
value-based payments, that have shown signs of accomplishing the goal of providing
cost-efficient high quality health care, Gary W. Herschman, of Epstein, Becker & Green
in Newark, N.J., told Bloomberg BNA. Herschman predicted commercial health plans will
“piggy-back on the early success of government value-based purchasing programs.” Thus,
they increasingly will be calculating provider payments based on shared savings, care
management fees, quality bonuses and bundled payments.

One of three things will happen in 2017, Mayo said. “Everything changes, nothing changes,
or some things change while others will be left alone.” In any event, “it will take
at least a few years for the dust to settle,”
he said.

Roth agreed, saying that, because it typically takes months for political appointees
to be nominated, vetted and confirmed, and hiring for other senior posts takes time
as well, the administration's policy changes should occur slowly.

“Of the initial executive policy changes likely to occur in 2017, many relate to the
absence of action:
abandoning affirmative litigation,
refusing to defend other actions, and
choosing not to enforce certain discretionary rules,” Roth said.

2. FRAUD AND ABUSE: No Slowdown in Enforcement

Advisory board members don't see the pace of fraud enforcement and litigation slowing
down in the coming year, in spite of the change in administration.

“Fraud and abuse continues to provide the core of any health law practice,” Richard
Raskin said.

Howard Wall agreed. Fraud enforcement is a bipartisan issue and, “beyond some philosophical
differences over physician ownership in facilities banned by the ACA, it is hard to
find many partisan differences,” he said.

The substantial penalties recovered through government investigations ensures that
fraud enforcement will remain robust, board members said.

“Prosecutions under the FCA, the anti-kickback statute and the Stark law continue
to be a prolific source of funding for the federal government,” Katherine Benesch
said. “As such, they will not be disappearing soon.”

In that case, the high court said a provider could violate the FCA by failing to comply
with material payment regulations but submitting claims for reimbursement as though
it had been compliant. This is known as the implied false certification theory of
liability, and the Supreme Court in
Escobar said the FCA requires the alleged misrepresentation be material to the government's
decision to pay the claim.

“In 2017, the courts and the government will be determining which requirements are
material for purposes of the FCA using the
Escobar standard,”
Michael Schaff, with Wilentz, Goldman & Spitzer P.A. in Woodbridge, N.J., said. “As
a result, the application of the implied certification theory of liability and the
new materiality standard established under
Escobar will shape how future cases are litigated under the FCA.”

Sanford V. Teplitzky, with Baker Donelson in Baltimore, agreed. “Going forward, the
only real important issue is whether noncompliance with a regulatory requirement is
material to the government’s decision to make payment for the services provided to
beneficiaries of the federal health-care programs,” he said.

According to Teplitzky, lower courts have already begun to take conflicting positions
as to whether a particular requirement is, in fact, material. Such a conflict could
bubble back up to the federal appeals courts and possibly the Supreme Court.

Stark Law Repeal

The past year saw some movement in the Senate Finance Committee toward limiting the
scope and force of the Stark law. Advisory board members said those efforts are likely
to continue in 2017.

“In light of reported statements from the Trump campaign regarding government regulation,
it is possible that the new administration and Congress may actually take action to
significantly change and cut back the coverage of this law,” Teplitzky said.

Benesch pointed to the administrative front and recent guidance from the CMS as evidence
of a more restricted view of Stark law enforcement in 2017 “CMS has included revisions
as part of the 2016 Physician Fee Schedule to reduce some of the technical requirements
for strict compliance under current exceptions to the Stark law,” she noted.

Restrictions on financial arrangements between hospitals and physicians have been
eased for accountable care organizations (ACOs) participating in the Medicare Shared
Savings Program (MSSP), she continued.

“Thus, while enforcement of the FCA and anti-kickback statute generally is as vigorous
as ever, the regulators have waived application of the Stark law and anti-kickback
statute for physicians and ACOs participating in the MSSP,”
she said.

Increased Penalties

Another issue that health-care fraud attorneys are watching is the effect that increased
civil penalties will have on new enforcement actions and settlement of pending cases.

The Bipartisan Balanced Budget Act of 2015 required all federal agencies to make civil
penalty inflation adjustments. That resulted in the first increases in civil monetary
penalties by the HHS's Office of the Inspector General (OIG) in approximately 20 years.
Additionally, the Department of Justice (DOJ) increased civil penalties under the
FCA for the first time since 1999.

FCA penalties increased from a minimum of $5,500 to a minimum of $10,781 and from
a maximum of $11,000 to a maximum of $21,563. Meanwhile, penalties for violation of
the anti-kickback statute increased from $50,000 to $73,588 and Stark law civil monetary
penalties increased from $15,000 to $23,863.

According to Teplitzky, “the pure mathematical calculation of penalties will no doubt
serve to restrict even further the realistic ability of health-care providers to get
their day in court.”

He said that this is particularly true under the FCA because courts are required upon
confirmed proof of the submission of false claims to impose at least the minimum penalty
amount per claim.

Teplitzky said the increased penalties “might further embolden the relator bar to
push the DOJ for larger settlements reflecting the larger potential recoveries under
the FCA.” Others added that the high “return on investment” for the federal government
could lead to an increase in investigations and recovery efforts by both agencies.

3. MEDICAID: Major Battleground in ACA Repeal Fight

Medicaid concerns were front and center for advisory board members who predicted ACA
repeal in 2017.

“If the ACA is repealed, many states will face major stresses on their Medicaid programs,”
Mark Kadzielski said. As an example, he pointed to the Medicaid expansion in his home
state of California.

“Under the ACA, California expanded its Medicaid program by adding 3.5 million members
and if Medicaid expansion is repealed, California will face losing
$15 billion annually in Medicaid funding,” he said.

Kirk Nahra agreed. “We will see a material impact on overall Medicaid populations,
and continued and expanded stress on the providers who treat these populations,”
he said.

Block Grants

The only question that remains for Medicaid reform is what it will look like. Some
board members looked to the lead officials named by Trump for clues.

“President-elect Trump’s choice of Seema Verma to head the CMS indicates that an overhaul
of Medicaid is on the way,” said W. Reece Hirsch, of Morgan Lewis & Bockius in San
Francisco. “As the architect of the Healthy Indiana Plan, that state's Medicaid program,
Verma knows how to use the Medicaid waiver process to make changes to Medicaid programs
without the need for federal legislation, particularly when working in collaboration
with Republican governors.”

Elisabeth Belmont pointed to Tom Price's record as providing a glimpse into Medicaid's
future. “Price has endorsed transforming Medicaid into a block grant in which the
federal government would provide states with a certain sum of money with which to
run the program and then reduce the federal government’s Medicaid spending,” she said.

Lowell Brown agreed. “Medicaid expansion, as it now exists, will likely be curtailed
and replaced with block grants, giving states more latitude,” he said. “Republicans
will do this in order not to be perceived as cutting benefits, but Democrats will
dispute that claim,” he added.

The introduction of block grants into the Medicaid program will probably hit expansion
states, like California, hardest, Brown said. “States that did not adopt expansion—for
example Texas and Florida—stand to benefit since they have nowhere to go but up,”
he added.

Resistance Likely

Some board members predicted that efforts to pull back on Medicaid expansion will
be met by resistance from all sides.

“The introduction of block grants to states to pay for Medicaid is sure to throw the
existing system into chaos,” Katherine Benesch said.

Such changes will not, however, come without a fight in Congress. “Hearings could
last for months, as armies of lobbyists for doctors, hospitals, consumers, pharmaceutical
companies and insurance carriers descend upon Washington,”
Benesch said.

Jennifer Ecklund agreed. Many states will resist efforts to roll back Medicaid expansion,
which “will adversely affect health-care providers—particularly hospitals—by increasing
the number of uninsured patients that they see.”

Howard Wall said the pressure from Medicaid expansion states could be enough to save
the expansion.

“For states that have already expanded Medicaid, especially states led by Republicans,
an outright repeal of Medicaid expansion would be a political disaster,”
he said.

Wall said that he expected an ACA replacement bill to continue Medicaid expansion,
possibly in the form of block grants, and “for the rest of the GOP states to expand,
especially if it can be packaged as a politically acceptable market focused Medicaid
‘reform' program.”

Some board members wondered what effect Medicaid reform efforts would have on charity
care and health-care safety net providers. “Even if the ACA is left unchanged in 2017,
will any of the 19 states that haven’t expanded decide that the burden on providers,
especially cash-strapped public hospitals, and on individuals is unwise and inhumane?”
Tom Mayo asked.

“The threatened contraction of Medicaid funding, and the introduction of block grants
to reduce spending for Medicaid could spell disaster for state governments and hospitals,”
Benesch agreed. “Many localities could be forced to choose between Medicaid coverage
for the uninsured and municipal services, such as police and garbage collection.”

Benesch estimated that between 9 million and 11 million people were offered coverage
through the public insurance exchanges in 2016, and many of those individuals would
be left without any health insurance coverage in the aftermath of ACA repeal.

She warned that rolling back Medicaid expansion in conjunction with the elimination
of the health insurance marketplaces could have disastrous consequences for providers.
“Hospitals would be required to care for increasing numbers of patients in the emergency
room and elsewhere, without reimbursement at significant cost to the institution,”
she said. “This could drive many facilities to be subsumed by larger institutions,
if possible, or to close their doors.”

4. CONSOLIDATION: Trend Continues Despite Administration Change

Health-care provider consolidation, including mergers and acquisitions, physician/hospital
alignment initiatives and clinical integration efforts, have been a trend for the
last several years. That trend isn't expected to slow down, advisory board members
said.

They expect health-care attorneys to be counseling clients on the varied consolidation
forms and how to pick the right one to meet the client's needs.

Hospital and health system mergers, hospital/health system physician practice acquisitions,
joint ventures between physicians and other providers, the development of large multi-specialty
practice groups, and corporate expansions in post-acute care, long-term care, home
health care and hospice care are just some of the ways providers will consolidate
in 2017. Others will clinically integrate to form ACOs.

These consolidations look like “cats and dogs lying down together,” as Lowell Brown
put it.

Uncertainty Won't Stop Trend

Trump's election introduced uncertainty in this area, but so far, the post-election
market is showing no slow-down in health-industry investment. Daily prices for health-care
industry stocks, for example, have been closing at record highs.

Advisory board members said they expect transactional activity to continue to be robust
because providers' reasons for consolidating aren't going to go away. Even if the
ACA is repealed and replaced, the revamped reimbursement models and quality of care
initiatives it inspired will continue, board members said.

Providers' desire to supply high-quality health-care services in the most cost-efficient
way is the consolidation trend's key driver, Gary Herschman told Bloomberg BNA. To
accomplish their goal, providers will need to spend tens of millions of dollars improving
their infrastructure by, for example, adopting electronic medical records systems
and updating facilities. Add in the costs of staff training, re-engineering of clinical
integration systems and developing evidence-based protocols to be shared among multiple
specialty groups, and smaller providers just can't weather the expense, he said. This
makes them ripe for a merger or integration with a larger system or practice group.

This dynamic gives health-care systems unprecedented opportunities to acquire physician
practices and stand-alone hospitals. The systems, in turn, are joining mega-systems
to gain access to needed capital, Herschman said. Health system networks also are
targeting specialty physician practices to gain better alignment, so they can widen
the range of health-care services they offer and take advantage of efficiencies and
savings gained by providing the full spectrum of acute and post-acute care.

Physician Practice/Hospital Alignment

Physician practice/hospital alignments are a leading form of consolidation, but many
of the earliest alignments are reaching their expiration date, Michael Schaff told
Bloomberg BNA. Some arrangements weren't as profitable as anticipated, so hospitals
are renegotiating deals. Physician compensation, for example, is almost always based
on productivity now, leaving physicians at a difficult crossroads, Schaff said.

Health-care attorneys should consider whether the physicians are open to starting
over or joining a new practice when counseling a physician practice on whether to
continue the relationship, Schaff suggested. “Some physicians are too late in their
careers to start over,” he said. They “may be forced to accept much lower compensation”
than the hospital initially offered.

Younger, more entrepreneurial physicians might be more willing to venture back out
on their own or join “supergroups,” Schaff said.

“In 2017, it will be important to follow the evolution of physician/hospital alignments
to see whether they continue or circle back to more independent practices.”
Schaff recommended attorneys carefully review affiliation agreements'
unwinding provisions before advising physicians on how to end their alignments.

Consolidation, however, will continue as providers seek the “integrated delivery system
holy grail,” Brown said. “Lines between payers and providers will continue to blur,
and pressure on states to repeal corporate practice of medicine laws will intensify
as providers integrate,”
he added.

“The reality is that everything that is being contemplated by health reform and health
system transformation is completely dependent upon physician and health system alignment,”
Howard Wall told Bloomberg BNA.

5. MEDICARE: Unexpected Reform Efforts Considered

While much of the pre-election debate and discussion surrounded the fate of the ACA,
in the weeks since the election Medicare reform proposals have begun to pop up. It
is unclear, however, exactly what shape these reforms will take and what elements
of the program could be on the chopping block, board members said.

“Reform of Medicare financing has been a gleam in the eye of Republicans in Congress
for years,” Katherine Benesch said. Examples of potential reforms include combining
Medicare Parts A and B, raising the eligibility age or creating a voucher system for
privately purchased insurance. But, she added, “it is unlikely Medicare fee for service
rates will be decreased much in the next year or two, as these rates are so low that
there is not a lot left to cut.”

The ACA's cuts in Medicare payments to hospitals were a “fair trade” for the mitigation
of uncompensated care costs that resulted from broader insurance coverage, Bob Roth
said. Eliminating the trade-off's benefits, however, “will further pressure hospital
margins, which are already negative nationally,”
he said. Interestingly, millions who obtained insurance coverage through the marketplaces
are in “red states” that voted for Trump, he added.

Privatization

The possible privatization of Medicare was on the minds of most board members. “Regardless
of how post-ACA policy is cast, Medicare cost containment remains a focal point of
federal health policy, and the Paul Ryan voucher idea will once again be in the mix,”
said John D. Blum, the John J. Waldron Research Professor at the Loyola University
Chicago Institute for Health Law.

T.J. Sullivan, of Drinker Biddle & Reath LLP in Washington, agreed. “It appears that
a fight may be brewing with the Speaker and House leadership hoping to take a test
drive of their newfound political majorities in an effort to reform Medicare by moving
to a premium support model,”
he said. “While Democrats will surely oppose such a move, President-elect Trump has
so far remained silent.”

Brian Hufford said Trump's pick to head HHS says a lot about where he would come down
in that conflict. “Tom Price is not only a leading opponent of Obamacare, but he also
has advocated privatizing Medicare, supporting prior efforts by Speaker Ryan to accomplish
that goal,” Hufford said. “While Trump opposed that effort during the campaign, his
selection of Price could indicate that he is willing to let privatization proceed.”

Jack Rovner said that such a reform might not be warmly received by Medicare recipients.
“Increased privatization of Medicare is an opportunity for private health insurers
beyond Medicare Advantage, but is it a change that will not be tolerated by seniors,
who overwhelmingly like Medicare as it is,” he said.

“If that movement gains traction it would represent an unprecedented, tectonic shift
in the Medicare program,” Reece Hirsch said.

ACOs and Alternative Payment Models

The Medicare Shared Savings Program (MSSP), which was created as part of the ACA,
could be on the chopping block depending on what the efforts to repeal the law look
like. That could mean a short life for any ACO formed as a part of that program.

However, some board members said ACOs could survive in spite of an ACA repeal. “Regardless
of whether MSSP ACOs survive, as commercial ACOs and clinically integrated networks
mature and associated providers expand their affiliations, we should begin to see
an increase in combinations, joint ventures, affiliation and expansion of ACOs, including
the advent of multi-state ACOs to match up with an anticipated increase in health
insurance offerings across state lines,” Gerry Griffith said.

“Evolving innovative reimbursement models and CMS demonstration projects, such as
bundled payment programs and the new Comprehensive Primary Care Plus (CPC+)
model, are placing compliance pressures on participating providers as they struggle
to reconcile program activities with other payment relationships with referring physicians
and others,” John R. Washlick, of Buchanan Ingersoll & Rooney in Philadelphia, said.

Washlick pointed out that some ACOs have left the MSSP but have decided to participate
in the CPC+ model, a public-private insurance program that creates incentives for
physicians to engage in alternatives to traditional office visits. It has incentives
for long-term care management, giving patients 24-hour access to health information
and adding services to doctors' practices that might have previously required a referral.

“These same ACOs would like to continue to extend many of the benefits that were conferring
on ACO participating physicians, but realize once they have withdrawn from the MSSP
the waiver protection they previously enjoyed to protect many of these financial arrangement
is no longer available,”
he said.

Board members also said they anticipate that the alternative payment programs created
as part of the Medicare Access and CHIP Reauthorization Act (MACRA) will survive the new administration's efforts to reform Medicare. “While the House
Republican ‘Better Way' calls for eliminating the Center for Medicare and Medicaid
Innovation, population health management and value-based health care pre-dated the
ACA and are broadly viewed as ways to bend the cost curve,” Elisabeth Belmont said.

6: ANTITRUST: Rise in Transactions May Attract Enforcers' Attention

Antitrust laws are bumping up against the consolidation trend, putting the issue front
and center for many health lawyers, board members said. Antitrust issues will be a
concern in 2017 for providers looking to increase efficiencies through consolidations,
they said.

Restrictive antitrust laws are keeping many health-care alliances from progressing
quickly, John Washlick told Bloomberg BNA, because it “takes years and millions of
dollars to actually be considered ‘clinically integrated'
for antitrust purposes,” he said.

He said he expects to see heightened scrutiny in 2017 but added that Trump's election
promises to usher in an era of deregulation. Many people believe antitrust laws and
regulations need to be “reined in to foster collaboration among providers and rate
transparency so patients can make better, more informed choices,” Washlick said.

Like everything else, the incoming Trump administration is a wild card. Trump's views
on antitrust enforcement “will have a significant impact”
on the health-care system, Mark Waxman said.

Federal antitrust enforcers in 2016 famously challenged two major payer mergers involving
Anthem and Cigna and Aetna and Humana, as well as hospital mergers in Chicago and
Pennsylvania. The Pennsylvania deal fell through after a federal appeals court sided
with the Federal Trade Commission, which said the merger likely would lead to lower
quality care and higher health-care costs in the Harrisburg, Pa., area (
FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 2016 BL 317602 (3d Cir.
2016)).

There are, however, questions about whether the Trump FTC will view the transactions
differently, Waxman said.

A relaxation of antitrust enforcement by the Trump administration “could have a profound
effect on all segments of the health-care industry,” Katherine Benesch said.

Payer Mergers' Impact

Major payer mergers, if allowed to go through, “could have a material impact on competition
with respect to both providers and patients,” Brian Hufford said. Fewer insurers means
providers would have less bargaining power when negotiating in-network contracts.
“Insurers, who already have a major advantage, will be able to continue pressuring
providers to take reduced payments for medical services,” he said.

This might reduce the level of services providers can offer, Hufford said. Patients
also will find it more difficult to buy insurance at a reasonable cost as the number
of insurers declines.

The outcome of two challenges brought by the FTC to the Anthem/Cigna and Aetna/Humana
mergers will indicate whether competition in the health insurer market “will continue
or crater,” Douglas Ross, with Davis Wright Tremaine, Seattle, told Bloomberg BNA.
If the mergers are approved, the country will have gone from five insurers to three.
“The next stop:
a single payer—although not the one many people envisioned when they campaigned for
the federal government to take over health care,”
he said.

State Role Increases

States may take on greater roles in enforcing antitrust laws to stop insurer mergers
and major hospital deals if the Trump administration backs down on enforcement, John
Blum and Gerry Griffith said.

On the other hand, Doug Ross and Jennifer Ecklund said mergers that run into initial
federal opposition may find the states a more favorable environment. Certificate of
public advantage laws, for example, have been used in places like West Virginia to
allow struggling health systems to merge. These laws cloak the deals with state-action
immunity, so providers frustrated with FTC interference may go that route, they said.

Another possibility could be “an upswing in private antitrust actions as consolidation
among health-care entities expands,” Mark Kadzielski said.

7. PROVIDER REGULATION: Billing, Tax and Malpractice Changes Expected

In the provider regulation arena, board members said tax reform, provider billing
regulation and the general antagonism to federal regulation, in addition to substantial
fallout from ACA repeal, are likely to affect the health-care regulation landscape
and challenge providers and their counsel in 2017.

“Health-care providers are among the most regulated business entities in the country,”
Tom Mayo said. “That was true before the ACA, and it will remain true if the ACA is
repealed root and branch, which seems terribly unlikely.”

Deregulation

Most board members said the incoming administration's stated distaste for federal
regulation will create major headaches for providers in the coming year.

“The CMS and other regulatory agencies will be watched closely to see if there will
be a movement to repeal and replace Obama-era regulations,” Mark Kadzielski said.
“Career regulators will have to answer to new bosses and work under new policy initiatives,
which is certain to cause confusion among the ranks of both the regulators and the
regulated.”

According to Gerry Griffith, the impact of any deregulation will depend on where the
administration focuses its efforts. Assuming deregulation happens, “the impact will
be more or less significant depending on which regulations are targeted.”

Griffith pointed to regulations under the Stark law, the anti-kickback statute and
Medicare as possible focal points. Deregulation efforts “may end up as part of a package
of legislative reforms to revamp or replace Obamacare,”
he added.

New Regulation

There are elements of the health-care industry that board members could see as inviting
new regulations in the coming year. These could address questions surrounding provider
billing and insurance reimbursement.

“Surprise billing legislation will be a hot topic in many states in 2017,” Michael
Schaff said.

He noted that, in 2016, surprise billing legislation was introduced in California
and New Jersey. “We expect continued regulation of provider out-of-network billing
and surprise bills on the state level,” he said. “In 2017, it is likely that more
states will consider similar legislation regulating out-of-network providers.”

Jennifer Ecklund agreed. “States will continue to be responsive to concerns about
provider prices, particularly the prices charged by out-of-network providers on staff
at in-network facilities,” she said.

Brian Hufford said that the question of how providers will be reimbursed and the role
of insurance companies in setting those rates will be a topic for the new administration.
“Allowing providers free reign to charge what they want, with no incentives to keep
costs under control, is, of course, an unacceptable model;
at the same time, a system must be put in place that rewards quality health care and
encourages a high quality of service.”

Hufford warned, however, that turning the regulation of prices over to the free market
based on competition between health insurance companies could lead to worse outcomes
for patients.

Because the patients who consume health care are insulated from its costs by only
seeing their monthly insurance premiums and occasional copayments “a profit-oriented
health insurance system, without aggressive governmental oversight and a strong plaintiffs’ bar that can challenge improprieties,
is not properly regulated by the free market.”

Medical Malpractice Reform

One other provider regulation element that board members are tracking is medical malpractice
reform.

There has been some movement on that front in Republican-controlled state houses,
and there could be a push to enact some sort of medical malpractice limitations as
a part of the expected replacement for the ACA.

“The push at the state level to enact arbitrary caps on damages in medical malpractice
cases and infringe on an individual’s common law right to a trial by jury will continue,
despite little data to support any correlation between caps and lower medical malpractice
insurance premiums,”
Howard Wall said.

“Federal tort reform could be tucked away in an ACA repeal bill but at least some
GOP members of the House expressed federalism objections to such a law last year when
an attempt was made to bring a bill out of committee,”
he added.

Wall also expressed surprise that Republicans, who generally believe in small government
and deregulation, could support a federal law that restricts the rights of injured
patients to bring lawsuits to obtain redress for those injuries.

Tax Reform

It also appears that tax reform, with potential implications for all health-care organizations,
will be a big issue with the incoming administration. “With Republicans holding both
houses of Congress and the White House, the conclusion that at least corporate tax
reform will be enacted soon seems inescapable,” T.J. Sullivan said.

But Sullivan said that he thought Section 501(r) of the tax code, which imposes compliance
requirements on tax-exempt hospitals, is likely to remain in the code, regardless
of any tax reform or ACA repeal efforts. “Sen. Chuck Grassley (R.-Iowa) authored the
provision and has championed and monitored its implementation,” he said.

Griffith said the Internal Revenue Service is likely to rely on more sophisticated
methods to audit providers. He said they could see “a rise of data-driven case selection
for IRS audits as it looks for the next best case based on tax and information return
reporting and referrals.”

As with last year, providers also should watch out for increased activity by states
and localities that are looking to find a way to collect property taxes from nonprofit
health-care organizations. According to Griffith, as local municipalities see their
budgets squeezed, nonprofit hospitals should expect to see more property tax exemption
challenges.

Sullivan said that state taxing authorities could see decisions by courts in New Jersey
and Illinois as creating an opening for increased imposition of property taxes against
nonprofit hospitals and their related facilities located in their states.

8. TELEMEDICINE: Forcing States to Reconsider Regulations

Telemedicine has been a major force in health care in recent years, and as more telemedicine
providers have begun to offer their services, more states have been forced to re-examine
their regulations and laws governing licensure and scope of practice.

“Telemedicine has been raising new legal questions for years,” Phil Zarone, with Horty,
Springer & Mattern PC in Pittsburgh, said. “However, it now could be poised to play
a role in the day-to-day work of all health-care providers, not just those in rural
areas.”

Zarone pointed to a recent study that suggested telemedicine services delivered via
a robot in a pediatric ICU were generally as effective as care provided by physicians
who were physically present.

“If health-care professionals start using telemedicine for rounding on patients and
other routine activities, it could significantly affect the relationships of physicians,
hospitals, patients and others in the health-care system,”
he said.

Katherine Benesch said pressure to reduce costs could drive providers more and more
to use telemedicine as part of their primary service offerings.

“As hospitals cut back on all types of services and providers they can no longer afford
to have on the premises, telemedicine providers and services are moving into the breach,”
she said. “As health plans work to move care out of expensive settings, more patients
are being visited at home via electronic means.”

Benesch cited the example of Kaiser Permanente, which reported that last year one
half of its 100 million doctor visits were virtual visits made through services like
videoconferencing and smartphones.

“As facilities and institutions consolidate, a smaller proportion of total care will
be provided by face-to-face doctor-patient visits,” she said.

Benesch predicted that telemedicine will be “one segment of the health-care space
that can expect to see continued growth in the coming years, especially in light of
a predicted doctor shortage.”

Gary Herschman agreed. “Telemedicine continues to expand in many regions because it
provides immediate access to care and triaging and, in certain situations, can be
the most cost-effective mode of providing high quality care.”

State Licensure

The main telemedicine constraint that states have struggled with involves licensing
regulations. That constraint is expected to be addressed by more states in 2017 as
they embrace telemedicine's promise, at least with respect to certain care regimes.

“It is likely that telemedicine will continue to shape the licensure and scope of
practice rules during 2017 as states struggle to adapt to this emerging trend,”
Michael Schaff said.

Schaff added that, as of November 2016, 18 states had enacted legislation adopting
the Federation of State Medical Boards’ (FSMB) Interstate Medical Licensure Compact
and one additional state has active legislation that would enact the compact.

The compact provides for an expedited licensure process for eligible physicians. There
also are pending interstate licensure compacts for nurses and other midlevel providers.
“The compacts are meant to improve license portability and increase patient access
to care,” Schaff said. “In the future, the implementation of the compacts may increase
the practice of telemedicine across state lines.”

John Blum said that action by state licensing boards could push federal authorities
to eventually expand coverage for telemedicine. “While the ascendency of state health
policy and the growth of a state telehealth compacts will frustrate a move toward
national telemedicine licensing, state regulation of this area will expand as greater
utilization of these technologies will be driven by cost and consumer demand pressures,”
he said.

“States will continue to expand Medicaid reimbursement in this area, and pressure
will continue to build for Medicare telehealth reimbursement outside rural areas,”
he added.

Competition Litigation

Another key battleground between telehealth providers and state regulators lies within
the antitrust realm, board members said. Telehealth providers have begun to challenge
licensing board decisions in federal courts claiming the boards are controlled by
practicing physicians who are allegedly trying to squash competition by preventing
entry for telehealth providers.

Several board members pointed to a case, which is in settlement negotiations in a
federal court in Texas, as illustrating the problem that can arise when state licensing
boards try to regulate the practice of telemedicine.

The lawsuit, brought by Teladoc Inc., challenged whether the Texas Medical Board violated
federal antitrust laws when it established regulations that required a physician to
have an in-person consultation with a patient before prescribing certain drugs.

The court recently placed the case on hold to allow both sides to work out the details
of a possible settlement (
Teladoc, Inc. v. Tex. Med. Bd., W.D. Tex., No. 1:15-cv-343, stay granted 11/4/16).

The settlement effort came on the heels of the court's ruling that the medical board
wasn't an arm of the state government entitled to immunity from federal antitrust
laws.

The competition to represent telemedicine providers can be fierce as well. “Health-care
practices appear to be scrambling to position themselves as the legal adviser of choice
on telemedicine,” Tom Mayo said.

“The federal rules are pretty restrictive and the states that have addressed the issue
seem to be all over the place,” Mayo added. “This should be a growing area of health
law that combines elements of licensure, cost-containment, and quality.”

Digital technology in health care is a “major area of innovation and expansion,”
Richard Raskin told Bloomberg BNA. He predicted continued development and introduction
of new health-care technologies that could change how providers do business and deliver
care.

Without this expansion, especially in the area of electronic health records, the industry
can't obtain the benefits of value-based purchasing and true integration, Gary Herschman
said. The “lofty goals of widespread and consistent high quality and cost-effective
health care” can't be achieved without advanced HIT, he added.

But buying and utilizing HIT systems don't come without consequences, because they
are highly regulated aspects of a highly regulated industry.

The Health Insurance Portability and Accountability Act (HIPAA) applies industry-wide
and encompasses business associates that don't provide health-care related services.
Those entities will come under greater scrutiny in 2017 as HIPAA Phase 2 audits are
completed, Reece Hirsch told Bloomberg BNA. “It will be interesting to see how the
HHS's Office for Civil Rights (OCR) assesses the state of business associates' HIPAA
compliance,” he said.

The business associate rules have been in effect for a little over three years, “so
it's likely that many business associates have much work to do,”
Hirsch said.

Privacy Rule Enforcement

The OCR “has been a zealous enforcer” of HIPAA's Privacy Rule, Howard Wall said, but
it isn't the only one. The OCR and the FTC in 2016 said they have overlapping enforcement
jurisdiction. Hirsch predicted the two agencies will act in concert more frequently,
especially as providers expand digital health offerings by providing patients with
access to mobile applications, personal health records, activity trackers and consumer-generated
health information trackers.

Kirk Nahra told Bloomberg BNA he is not sure if the new administration will continue
these enforcement efforts. The Trump administration may not dedicate a lot of resources
to HIPAA enforcement, but there probably won't be any weakening of the Privacy and
Security rules under Trump either, he said.

Anyone “who says something specific”
about the administration's position regarding HIPAA “is just making broad generalizations
from big picture themes,” Nahra said. Still, the administration could reduce the impact
of meaningful use requirements and put through fewer electronic health records regulations,
he said.

Cybersecurity

Nahra said cybersecurity also looms large as an issue for health-care providers. He
said he believes there will be more, not less, emphasis on preventing unauthorized
intrusions into providers' computer systems.

New cybersecurity threats emerged in 2016, Elisabeth Belmont added, noting allegations
of foreign government hacking during the presidential election. Hackers have hijacked
millions of Internet-connected devices, and several hospital hacks were reported during
the year. John Washlick told Bloomberg BNA “any and all cyber systems are vulnerable
to hacking.”

“The health-care industry is now a target for some of the most sophisticated and pernicious
cyber threats, so health-care organizations are going to have to take these new risks
into account as part of their HIPAA security risk assessment efforts,” Hirsch said.

OCR is trying to address the issue. In October it released a guidance for providers
on using cloud services that offer access to shared resources, Michael Schaff noted.

The move toward interoperability may complicate the picture, Wall said. Interoperability,
or the ability of providers to access electronic health records created by other providers,
“is essential to make the truly integrated/accountable delivery model a reality,”
he said.

Cybersecurity may be the biggest risk area, but smaller breaches may become a more
popular enforcement area, Belmont said. The OCR traditionally investigates breaches
affecting 500 or more people, but it recently said it will more closely scrutinize
smaller breaches and look for systemic noncompliance.

Misuse of electronic health records presents a lesser-known but just as dangerous
risk from a patient care perspective, Mark Kadzielski told Bloomberg BNA. Inaccurate
or misleading information entered into an electronic record may be copied into other
records by careless or overwhelmed staff, “creating enormous potential for patient
care problems.” Chart audits catch some issues, but better staff training and “careful
and thoughtful documentation is the long-term solution,” he said.

Belmont advised providers to take steps to ensure their “culture of patient safety
includes shared involvement and responsibility of all stakeholders” when it comes
to addressing potential HIT risks. This requires a periodic reexamination of all stakeholders'
roles, including the organization, clinicians and HIT vendors and developers, she
said.

10: CORPORATE GOVERNANCE: Advising Boards Will Be Tricky

Advisory board members included corporate governance on their Top 10 lists because
directors must be made aware of, and closely monitor corporate policies to address,
the numerous health law challenges that will confront health-care organizations in
2017.

“The anticipated dramatic changes in federal health policy proposed by the change
in administration present an enormous education challenge for health-care organization
boards,” Michael W. Peregrine, with McDermott Will &
Emery LLP, Chicago, told Bloomberg BNA. For boards to “capably exercise their decisionmaking
and oversight duties, and to be effective partners with management in the transition
period, they will require a crash course in the policy changes and their basic implications.”

Tom Mayo predicted the level of regulatory uncertainty following the election will
make 2017 “a tougher year than most for health-care organization board members.”

Health-care delivery systems are expanding throughout the country, Anne Murphy said.
An organization's legal counsel, therefore, must ensure that all organizations within
its system are in compliance with state and federal laws and regulations.

“This requires close collaboration with the senior management teams, compliance officers
and governing boards for the system and the affiliated entities,”
Murphy said.

Complex and big data-driven boards must adapt in a manner that allows for meaningful
oversight as the health-care industry grows more diversified and complex, Murphy added.
This might involve creating a robust committee structure or enhancing the board's
enterprise risk management oversight function, she said.

Fraud as Board Concern

The DOJ announced in December that it collected $4.7 billion as a result of FCA lawsuits
in fiscal year 2016, John Washlick noted. A substantial amount of that total was attributable
to stepped-up payouts from corporate executives, demonstrating the increased scrutiny
health-care executives are facing, he said.

Attorneys counseling boards must advise them on strategies for meeting these ever-expanding
fiduciary challenges and the consequences of failing to do so, Murphy said. Individual
officers and board members risk financial and criminal exposure if they don't meet
those challenges.

Peregrine echoed that sentiment, noting the substantial penalties leveled against
individual officers and directors in recent FCA settlements and at least one individual
debarment. Washlick said he expects the trend to continue in 2017.

Fraud compliance comes within the board's duties on a macro level as boards are responsible
for the “tone at the top and for ensuring the organization has a comprehensive and
credible compliance program,” Sandy Teplitzky told Bloomberg BNA.

Day-to-day fraud compliance efforts, however, aren't the board's responsibility. Still,
the board should be setting the tone on such issues as the relationship between an
organization's audit, compliance and legal departments; the organization's reporting
process; the organization's approach to identifying regulatory risks;
and methods for encouraging corporate-wide accountability, Teplitzky said.

Transactional activity also is a board concern because “many health systems are struggling
with the challenge of divesting ‘losing' facilities in order to protect the bottom
line,” Mark Kadzielski said. Physician leaders, who have divided loyalties in the
health-care marketplace, also will cause more conflicts at the board level, he said.

Peregrine agreed. The decision of when to pursue a merger presents a challenge for
board members, who must be made aware that antitrust barriers to potential mergers
may increase after the FTC's win in a case involving the merger of two Pennsylvania
hospitals and its ongoing challenge of a Chicago-area hospital merger.

“The costs of evaluating and then defending a concentrated market merger in such circumstances
requires a much more refined exercise of board business judgment,”
Peregrine said.

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)